Insurance Companies Blame 2009 Losses on Personal Accident & Bodily Injury Claims
We recently heard that rising Personal Accident and Personal Bodily Injury Claims were pushing up the prices of
Car Insurance premiums, now as the major UK Insurance Companies take stock of 2009 with the final quarter results, it appears that rising bodily injury claims and an unusually kind hurricane season were the two biggest factors in the 2009 results published to date.
There has been a mixed bag of results in the insurance world this week as a variety of insurance companies have announced how they have fared across the last year.
One of the biggest impacts on the industry was the phenomenal upsurge in the rising cost of bodily injury claims - partly as a result of the recession and partly due to the increase in claims farmers.
Kris Oldland gives Insurance Blog a roundup of the 2009
UK Insurance results so far..........
The insurance arm of part nationalised bank Royal Bank Scotland was heavily hit with profits collapsing by 90% with £448m reserves being set aside for bodily injury (BI) claims.
The group which includes Direct Line, Churchill, Privilege and NIG – posted a drop in net income from £584m in 2008 to £54m last year. Chief executive Paul Geddes claimed that considering their size and risk exposure, 2009 was always likely to be a tough year saying that being “twice as big as anybody else, when the market sneezes we catch a cold.”
Of course many of the major operators within the personal lines market were hit particularly badly by the rising cost in BI claims although RSA managed to reduce the damage to just £30m by taking early action to counter the rising costs.
UK Chief Exec Adrian Brown admitted that “The hit to our result is fairly small compared with some of the other numbers being thrown around.”
He added “When it comes to bodily injury costs, you have to be massively up to date on claims; they are one of the things you have to watch like hell when you are cutting expenses and headcount.”
Another company that felt the impact of rising personal injury claims was the
specialist car insurance company Equity Red Star who had a strong full-year profit of A$113m eroded away by bodily injury claims. Insurance Australia group (IAG) who own the company put a statement to market that read “A lower margin of 6.6% reflected reserve strengthening for prior-year bodily injury claims and weaker investment returns, both of which have been felt across the UK industry.”
Meanwhile Allianz have grown their operating profit in the last year by 5% climbing to £203m in the last year while the combined ration improved from 95.2% to 92.9% despite the obviously tough trading conditions.
A large part of the success has been down to Allianz’s hard line stance on driving rate rises of 24%. Chief executive Andrew Torrance predicted more of the same in 2010 commenting that “It remains a priority for in 2010 to increase premium rates to a level that provides an adequate return on the cost of capital.”
Other insurers posting impressive results for 2009 were Amlin and Hiscox who both had strong years due in large to the reasonably benign hurricane season.
Amlin were able to post combined operating ratio improvement from 76% to 72% although their results were padded out slightly by £174.1m in reserve releases whilst Hiscox insurer tripled profits before tax from £105.2m to £320.6m, in what chairman Robert Hiscox described as a “vintage” year.
Another Lloyd’s insurer to triple profits in 2009 thanks to the kind hand dealt by mother nature last year was Brit who increased profits to £171m although an uplift in investment returns of £137.4m last year from £7.4m in 2008 certainly would of helped also.
........So it looks like a lot of people will be seeking big bonuses?
Labels: insurance news, Insurance Profits, UK Insurance, UK Insurance Market
End of The Line For Insurance Mergers & Acquisitions?
There is conflicting evidence as to whether the
UK Insurance M&A Market is contracting.
Certainly it looks like some of the much bigger UK Insurance boys are up for sale! We sent our Insurance Newshound Kris Oldland out to find out who is up for grabs; and just what is going on in the
UK Insurance Mergers And Acquisitions Markets?
UK Insurance Mergers and Acquisitions: Rumours round up!
First up is Insurer Provident, who are looking good for acquisition after having had their long-term counterparty credit and insurer financial strength ratings upped from stable to positive and affirmed at BB+ by ratings agency Standard & Poor.
An S & P spokesman commented that the revision was “based on the possibility that there will no longer be any parental constraint on the ratings on Provident Insurance following its sale, thereby allowing the company's ratings to move by up to two notches to that of its stand-alone credit profile.”
Provident’s current parent GMAC has suffered a weak credit quality which has impacted upon the insurers rating.
However with the company effectively up for sale the parental constraints are less likely. S&P's credit analyst Nigel Bond commented "The outlook also continues to reflect our understanding that the company's financial strength will be protected to a significant extent by its supervisor, the UK Financial Services Authority.”
Bond also added “If the sale does not occur, or the financial strength is not adequately protected, it could lead to a negative rating action."
Meanwhile the Kwik Fit Financial Services (KFFS) is looking to be sold for the fourth time in just over a decade.
French private equity firm PAI Partners have put a £200m price mark on the company after contracting Credit Suisse to perform a strategic review of their current business operations. However, it would seem that they won’t have to look too hard to find a suitable buyer with insurers, brokers and rival private equity firms all being rumoured to be voicing an interest in the private lines motor insurer.
Managing Director of KFFS Brendan Devine commented “KFFS is now a major financial services organisation; it is getting fart to big to be part of what is a tyre and exhaust company”
The insurance company recorded an £82.7m brokerage in 2008 ranking it as the 15th largest broker according to IMAS and also includes Green Insurance Company and motorbike specialist Express.
Getting back into the acquisition trail are Kerry London who are in good shape after rather smartly side stepping the difficulties suffered in the construction sector and diversifying to maintain a healthy cross sector portfolio.
Following on from the launch of an MGA with Fortis in May last year in the sports and leisure field (which is currently operating 20% above predicted revenues) Kerry London have posted impressive figures for the last year with annual turnover up to £15.9m in 2009 and a bank debt being reduce to £5.75m from £9.3m.
Despite an embarrassing “oversight” which led to a winding up order being served due to a failure to register full year accounts for 2008, the company are bullish about being in a good position to get back on the hunt for new acquisition and have confirmed that they have brought in a specialist adviser to work on their acquisition strategies.
Household brand E-Sure has also been snapped up recently by E-Sure founder Peter Wood backed by Private Equity firm Tosca Penta Investments and Electra Partners.
Mr. Wood founded the company in 2000 with the support of Halifax which has since become firstly part of the Bank of Scotland group and subsequently became part nationalised as a direct result of the recession. He has now taken a 70% stake in the company once more.
Taking an immediate step away from HBoS any existing policies underwritten by E-Sure will now be passed back to Halifax on renewal.
A spokesman said “As we are now independent it does not make sense for us to underwrite a Halifax named brand.” However, the existing deal between E-Sure and Sainsbury’s is likely to remain in tact despite originally being a joint venture between Halifax and the Supermarket giant.
“Everything is the same except one major shareholder has been replaced” the spokesman added regarding the Sainsbury’s deal. “The Sainsbury’s contract is still at E-Sure”
Finally, Lloyds broker RFIB’s new chief exec Marshall King has also indicated that he expects them to become acquisitive in the near future, although he is shying away from the seemingly mandatory desire to float on the London Stock Exchange just yet.
After a successful Private Equity backed MBO just under three years ago RFIB have had a phenomenal success posting a 73.52% annual profit growth to £6.06m last year. Now it appears that King wants to move them into the next tier. “Will we consider acquisitions in the future? Yes we will. When you get to a certain size then it makes sense to take slightly bigger bites if there is a good fit.” He said adding that he would be “surprised if we do not make one or two [acquisitions] in that time”
With Pricewaterhouse Coopers currently reporting M&A levels have dropped throughout the financial crisis by a staggering £30bn/year since the halcyon days of 2007, one could be forgiven for taking this brief flurry as an indication that we are starting to get back on track.
And with the onset of Solvency II possibly providing a catalyst for a further rise in M&A activity in the industry, as capital providers from a wider range are enticed into a well structured and regulated industry, then maybe, just maybe we may be getting ourselves back on track?
Hmm, Intersting stuff Kris! Insurance blogger then phoned up Insurance Mergers And Aquisitions specialist Anne Moran of Insuretec, who confirmed our suspicions about the
UK Insurance Brokers Market.
She told
Insurance Blog,
"We are seeing much more activity on the buying front, from Insurance Companies who are seeking to purchase insurance brokerages and accounts, offering both exits and continual active roles, making the offers available both more flexible and attractive to the seller."
"Insurance companies are looking to build and strengthen the brokers they are purchasing."
Sellers have many options available to them now. Our introduction service is free to all sellers and we help make the options available to them."
"Brokers are still active purchasers, looking for varying areas of insurance portfolios and brokerages."
"Wholesale and underwriting agencies are back in demand."
" We always have a demand for property owners, quality commercial large or small, household and motor( especially specialist)throughout the UK so if you are considering selling or looking at other options please talk to us first at
http://www.insurancebrokersellers.com "
Labels: acquisitions, Insurance Mergers and Acquisitions, mergers, Mergers and Acquisitions, UK Insurance, UK Insurance Market
